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Deferring non-AGR dues new option on government table

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Deferring non-AGR dues new option on government table

Deferring non-AGR dues new option on government table

NEW DELHI: The government is working on all options, including deferring carrier dues other than adjusted gross revenue (AGR) liabilities, to ensure Vodafone IdeaNSE 4.76 % isn’t forced to close, the sector remains viable and no jobs are lost, said a top government official.

The government is not planning to introduce an ordinance to change the definition of AGR to help state-run companies such as GAILNSE -0.46 %, Power Grid Corporation of India LtdNSE 0.93 % and Oil India Ltd, he said. These companies need to approach the telecom tribunal against the demand notices issued by the Department of Telecommunications (DoT) and get relief as indicated by the Supreme Court, he said.

“Our dilemma is on one side we need to follow the Supreme Court’s order, secondly, take money from telcos and thirdly, keep them alive. But our stand is very clear, the government doesn’t want a monopoly in this country,” the person said. “There is so much financial pressure and such stress in the sector… We have to find a solution keeping all this in mind. The DoT is exploring all possible ways to find a solution, which includes deferment of dues to the government other than AGR.”

Deferring non-AGR dues new option on government table

Relief to Voda Idea
He added that the DoT is exploring the possibility of seeking the solicitor general’s legal opinion on the need to invoke bank guarantees since telecom companies have started paying the government as per the Supreme Court’s order.

“Invoking bank guarantees at such a time might frustrate their efforts to comply with the Supreme Court order,” the official said, adding that prima facie, the top court had given the companies time till March 17 to pay the full amount.

That’s the date when modification pleas filed by the telcos will be heard by the Supreme Court. Vodafone Idea and Bharti Airtel have sought to be allowed to negotiate with the DoT on modalities and longer timelines for payment of dues.

“In any case, calculation of bank guarantee will also take some time as it has to be computed for different circles,” the official added.

The comments by the official will come as a relief to cash-strapped Vodafone Idea, which has urged the DoT not to encash bank guarantees to recover liabilities. If that happens, the telco has said it will have to close.

“Invoking bank guarantees will mean companies will go bankrupt and then so many employees will lose jobs,” the official said.

Vodafone Idea has so far paid Rs 3,500 crore of the Rs 57,000 crore dues estimated by the DoT. The telco though has estimated its dues at around Rs 23,000 crore, of which Rs 7,000 crore is the principal. But experts said that, given its financial condition, the telco may not be able to pay even this if it has to do so in a short period of time.

Bharti Airtel has paid Rs 10,000 crore of its dues to the government and said it will pay the rest as per its self-estimate before March 17. The DoT’s AGR estimate for the telco is nearly Rs 40,000 crore but ET has reported that Airtel’s own assessment puts it at half that sum.

“The amount the telcos pay could be different from DoT’s calculations, which is a matter of calculation and debate and can be resolved later,” the official said. “The main point is, in principle, the companies have started to pay substantial amounts towards AGR dues.”

He though added that the DoT will examine through random test checks, any deviation between telcos’ AGR calculations and the department’s estimates, before March 17.

The checks will be done for all telcos but will start with the likes of Tata Teleservices which has paid Rs 2,197 crore and said it was the full and final payment.

On Wednesday, Vodafone Idea chairman Kumar Mangalam Birla and managing director Ravinder Takkar met telecom minister Ravi Shankar Prasad and telecom secretary Anshu Prakash to seek relief and discuss the wider implications for the economy and jobs. Birla and Bharti Airtel chairman Sunil Mittal also met finance minister Nirmala Sitharaman to press for relief for the sector.

On Thursday, Mittal met Prasad, and sought steps, including lowering of taxes, to ensure the sector remained viable.

“The AGR has been a major crisis for the industry that is being dealt with by the government,” Mittal told reporters after meeting Prasad. “This government is very focused on reviving sustainability of the sector. All these meetings which are happening reflect how the government is alive to the situation of the sector.”

Vodafone Idea jumped 5% to close at Rs 4.40 on the BSE on Thursday. Bharti Airtel closed 0.4% higher at Rs 545.50.

ET reported on February 19 that the government has called on cabinet secretary Rajiv Gauba to help chalk out steps to try and ensure that no telco shuts down, given the fact that a Vodafone Idea collapse will have an impact across sectors, lead to job losses, hit the broader economy and taint the global perception of India.

The official cited above, however, blamed the telcos themselves for the current crisis, saying they should have set aside the dues after a Supreme Court order of 2011 clarified the definition of AGR or paid up the money back then, when the dues were much smaller.

“In 2003, when we migrated from revenue sharing to licence regime, the terms of the licence clearly imposed upon you the obligations to pay the AGR. Right or wrong is not the issue, at that time you accepted the obligation with an open mind,” he said. “So, how come, you never factored this into your books of accounts?”

In 2011, the amount was just about Rs 2,000 crore each, he pointed out.

“Now, when the Supreme Court has lashed out at you, suddenly you are raining money on the DoT,” he said. “Had the telcos paid up earlier, this situation wouldn’t have arisen.”

The Supreme Court settled a 16-year dispute by ruling on October 24 that AGR includes non-core items, leaving 15 telcos, including Vodafone Idea and Airtel, facing dues of over Rs 1.64 lakh crore, and triggering a period of intense turmoil in the industry, just recovering from over three years of brutal competition. The court also already rejected review petitions filed by the telcos, prompting them to file the modification plea.

Neha Bansal is a Delhi based engineering graduate and has done her Post Graduation in Human Resource Management. She has a deep interest in startups, business & technology.

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